In his New York Times column today, Nobel Prize-winning economist Paul Krugman homes in on what he calls the Republican Party's "full-on conspiracy-theory crazy" views on the Federal Reserve, the country's central bank. While monetary policy typically plays little role in national elections, Krugman argues that given the dangerousness of the GOP's ideas on the subject, 2016 should be an exception.
"Right now, the most obvious manifestation of money madness is Senator Rand Paul’s 'Audit the Fed' campaign," Krugman writes, referring to the likely presidential candidate's effort to place the central bank under congressional greater scrutiny -- i.e., political pressure. Like many other conservative politicians and economists, Paul has been predicting that the Fed's economic stimulus measures will produce hyperinflation -- any day now! -- for the better part of the past six years, with nothing to show for such hysterical warnings.
Such fringe views are par for the course from Paul, whose goldbug father proposed the outright abolition of the Fed. But what about the Republican field's supposed moderate, Jeb Bush? There's reason to fear he may be just as beholden to the right's deranged notions about monetary policy:
You may think that at least some of the current presidential aspirants are staying well clear of the fever swamps, but don’t be so sure. Jeb Bush appears to be getting his economic agenda, such as it is, from the George W. Bush Institute’s 4% Growth Project. And the head of that project, Amity Shlaes, is a prominent “inflation truther,” someone who claims that the government is greatly understating the true rate of inflation.
So GOP candidates either adhere to discredited, conspiracy-minded monetary views, or they'll likely feel obliged to defer to them. What's behind this craze? Krugman argues it stems from a conservative cast of mind which treats the market as a morality play:
You see, in the conservative worldview, markets aren’t just a useful way to organize the economy; they’re a moral structure: People get paid what they deserve, and what goods cost is what they are truly worth to society. You could say that to the free-market true believer, to know the price of everything is also to know the value of everything.
Modern money — consisting of pieces of paper or their digital equivalent that are issued by the Fed, not created by the heroic efforts of entrepreneurs — is an affront to that worldview. Mr. Ryan is on record declaring that his views on monetary policy come from a speech given by one of Ayn Rand’s fictional characters. And what the speaker declares is that money is “the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. ... Paper is a check drawn by legal looters.”
The next president, Krugman points out, will have the opportunity to appoint a new Fed chair to replace current chairwoman Janet Yellen -- all the more reason to keep monetary policy front and center heading into next year's campaign.